Sixth Circuit Issues Major False Claims Decision

On March 28, 2023, the U.S. Court of Appeals for the Sixth Circuit issued an important decision, US ex rel Martin, et al., v. Hathaway, et. al., Case No. 22-1413, regarding the Anti-Kickback Statute (AKS) and False Claims Act (FCA). In affirming the District Court’s dismissal of an FCA complaint against Oaklawn Hospital (Oaklawn) and a physician, the Sixth Circuit placed boundaries on the term “remuneration” under the AKS, which prohibits, among other things, making certain referral arrangements in return for “remuneration.” Its decision is the first to define the scope of the term “remuneration” under the AKS. In addition, the Sixth Circuit adopted the “but-for” standard for causation to bring an AKS claim. This decision empowers healthcare providers, and other companies, with strong legal arguments to dismiss speculative and unsubstantiated lawsuits brought under the AKS and FCA.

The case arose from a business divorce between two ophthalmologists, both of whom referred cases to Oaklawn Hospital. The Relator, Dr. Martin, sought to be employed by Oaklawn, but the Oaklawn Board ultimately decided not to establish an in-house ophthalmology practice and, therefore, did not hire Dr. Martin. Dr. Martin maintained that Oaklawn’s decision not to hire her constituted remuneration to her former partner, Dr. Hathaway, in order to have his referrals continue at Oaklawn. Both physicians performed procedures at Oaklawn before and after the Board’s decision.

In rejecting Dr. Martin’s claim, the Sixth Circuit explained that the term “remuneration” is undefined in the AKS. However, the Court determined that the term does not encompass any act that “may be valuable to another.” Rather, it is limited to “just payments, and other transfers of value.” (Op. at 5). Chief Judge Sutton emphasized that a broader definition would eliminate any “coherent end point” and incorrectly subject appropriate decisions by a hospital to be classified as “remuneration.” As the Court concluded, Oaklawn’s decision not to hire the Relator may have benefitted the other physician in his practice or business negotiations about a possible merger, but that was not “remuneration by any standard definition.” (Op. at 10).

Following the Eighth Circuit, the Sixth Circuit also ruled that the term “resulting from” in the AKS requires “but for causation”—a standard that the Relator did not satisfy in this case. This ruling is contrary to the Third Circuit, which has applied a broader “taint” standard and rejected the requirement of “but-for” causation. In closing, the Sixth Circuit highlighted that an overly broad or “too loose” definition of “remuneration” or “resulting from” was unworkable. Such an expansive definition could envelop every aspect of the “workaday practice of medicine” and impair the quality of care—certainly not the purpose of the AKS.

Dykema represented Oaklawn in the federal district court and in the U.S. Court of Appeals for the Sixth Circuit along with Schroeder DeGraw of Marshall, Michigan. The American Hospital Association and the state hospital associations for Michigan, Ohio, Kentucky, and Tennessee submitted an amicus brief in support of Oaklawn. The U.S. Department of Justice submitted an amicus brief in support of the Relator.